Breathing Room
Many of our breakout stocks continued
to act well Monday while more correction-recovery breakouts expanded the list of
high relative strength names emerging into new high ground.
Some of our babies, however, have grown
extended in price while others were buffeted Monday by selling. Are these signs
of a prelude to a reversal into the old bear market, or mere profit-taking and
consolidation on the road to higher highs and fatter profits?
Only time will tell. The key is to
monitor your positions closely but give them breathing room. Some may pull back,
even on heavy volume. If you want to score a big win, you must restrain
the impulse to run at the first sign of a fight. Expect a battle between
the bid and the ask as these stocks try to move to unprecedented price levels.
Respect your price stops. If a new buy falls and hits your stop, sell it. Protect your account. Otherwise, give your new buys room to breathe. Don’t overreact to normal bouts of volatility. Don’t sell over jumpy nerves. Traders who fail often take profits too soon while selling their losers too late.
Here’s
where psychological discipline comes in. It’s one thing to buy a breakout off a classic
chart pattern and feel good about the first two or three days of follow through.
It’s quite another to put money on the line and watch the stock whip around above your stop. In
chess, anyone can memorize an opening and hold on for a few moves against a
grandmaster. It’s the middle game that tests your mettle. The same applies to trading. So don’t let
the market jerk your chain.
Career Education
(
CECO |
Quote |
Chart |
News |
PowerRating) had a
bearish engulfing day on so-so volume. The stock closed 2.0% below its pivot
(1/8 above the March 27 intraday high), not enough to trigger the
intermediate-term trader’s stop.
Fluor
(
FLR |
Quote |
Chart |
News |
PowerRating) pulled back on heavy
trade but closed well above its prior base. Pulte
(
PHM |
Quote |
Chart |
News |
PowerRating), Hot Topic
(
HOTT |
Quote |
Chart |
News |
PowerRating)
and Scios
(
SCIO |
Quote |
Chart |
News |
PowerRating) acted likewise. International Game Technology
(
IGT |
Quote |
Chart |
News |
PowerRating)
put in a shakeout.
Meanwhile, other recent breakout
stocks consolidated or moved up, a good sign for the market, while fresh names
broke into new high ground from bases or shorter consolidation zones. Charlotte Russe
(
CHIC |
Quote |
Chart |
News |
PowerRating)
sat pretty on declining trade and marked time like a lady. Surmodics
(
SRDX |
Quote |
Chart |
News |
PowerRating)
moved ahead on strong volume. Skechers
(
SKX |
Quote |
Chart |
News |
PowerRating) lapped up. BEI Technologies
(
BEIQ |
Quote |
Chart |
News |
PowerRating)
shot higher on heavy volume.
Arch Coal
(
ACI |
Quote |
Chart |
News |
PowerRating) is acting a tad tired after a fine ascent from a Feb. 1 breakout. The air may be getting a little thin up there. I don’t make recommendations on individual stocks. I offer education and ideas for your consideration. However, this is an appropriate juncture to mention a prudent rule of money management. If you have a big profit in a very extended
stock (one that has ascended far above support), consider taking full or half profits. In the latter case, move up your stop on the remaining wager to break even or still higher to a profitable price level that corresponds with an area of recent support.
Remember, friends, that I’ll be hanging out Tuesday 8 p.m. ET on the intermediate-term trader’s message board. Come and bring your trading questions. To join our party, click on the TMWORLD tab at the top of this page or the home page. Then click on the Message Boards link and the Intermediate-Term Board link. Until then, happy trading!
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